OnLive Sold, Staff Reportedly Cut

OnLive, a pioneer in online gaming and virtual desktop infrastructure-based services, reportedly laid off staff members today and was sold to an undisclosed purchaser.

Multiple press accounts have reported mixed details. The company's public relations voicemail box was full at press time. However a VentureBeat article received a confirmation.

"We can now confirm that the assets of OnLive, Inc. have been acquired into a newly formed company and is backed by substantial funding, and which will continue to operate the OnLive Game and Desktop services, as well as support all of OnLive's apps and devices, as well as game, productivity and enterprise partnerships," according to the statement received by VentureBeat.

The acquiring company wasn't identified.

The first account of trouble at the company was reported by Kotaku.com, which indicated that Palo Alto, Calif.-based OnLive is undergoing a process similar to bankruptcy called "assignment for the benefit of creditors."

Another account, from TechCrunch.com, stated that Founder and CEO Steve Perlman is leaving OnLive and the company is being sold. The article also reported that the entire staff was fired "to reduce the company's liability."

Perlman recently spoke with Fortune about OnLive, including a rumor that Microsoft, at one point, had considered OnLive as an acquisition prospect.

If Microsoft ever was considering buying OnLive, it didn't cut it much slack. In mid-March, a Microsoft vice president overseeing licensing suggested publicly that OnLive was improperly licensing Windows 7 by using it in a multitenant environment to deliver services to customers. Microsoft doesn't permit that use of its client operating system. Oddly, Microsoft only offers a Service Provider License Agreement in a multitenant environment with Windows Server 2008 R2.

OnLive apparently responded to Microsoft's public critique and switched to using Windows Server or some other server technology to deliver services. The switch was marked by OnLive's customers, who noted in an OnLive Web site forum section that the service had some peculiar user interface differences.

OnLive claimed in a March 2009 press release to have emerged from seven years of stealth development to deliver an on-demand games platform that works across "almost any PC or Mac." Later, the company added support for Android devices. It also had rolled out a service that used virtual desktops to deliver Microsoft Office apps to Mac and Android users for a low monthly fee.

Any pressures exerted by Microsoft likely didn't represent the end of OnLive's problems. The company now faces increased competition, especially with Sony's announcement in July that it plans to purchase rival cloud-based games service provider Gaikai for $380 million. An Engadget story, citing an unnamed source, described OnLive as having high operating costs of $5 million a month.